I live in Hawaii and recently heard my large, Hawaii-based employer use the term “cost of labor” when explaining how they derived the organization’s new salary ranges. It’s no surprise that jobs and companies in Hawaii generally pay less than equivalent jobs/companies on the mainland. But when I asked my employer on an all-company call to explain what cost of labor actually is and why Hawaii employers can pay so much less than companies on the mainland, the answer the consultant provided was largely a non-answer.
Can someone explain to me like I’m 5, why is Hawaii’s cost of labor so low compared to the mainland?
(Edit: for clarification, cost of living and cost of labor are different terms, and I’m wondering why the cost of labor in Hawaii Is so disproportionate to the cost of living compared to parts of the mainland that also have high costs of living, such as much of California, NYC, Washington, and so on. The disparity between these two terms seems much more significant in Hawaii)
In: Economics
You’re the labor. And they’ve determined that most, or at least enough, of you will stay working there at those salary ranges.
I don’t know for sure the economy of Hawaii, but typically it would be some combination of a lower cost of living (so people can get by with less money), large number of job seekers (so people can’t afford to be picky about what job they take), and little desire/ability to go elsewhere for work (it’s presumably pretty hard to commute to work from Hawaii).
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